Fund firms may face action over advice failings

Michael Bow
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TWO FINANCE companies could face tough penalties after the City watchdog uncovered “egregious failings” in charges levied on customers for financial advice.

The unnamed firms, a financial advisory and wealth manager, are likely to be referred by the Financial Conduct Authority (FCA) to its internal enforcement division after a probe found large swathes of the industry were breaking the watchdog’s new rules and misleading consumers.

The investigation is the second review by the regulator following changes made by the retail distribution review (RDR), which was supposed to increase transparency in charges levied for financial advice.

The FCA said that despite the law being nearly 18 months old, almost three quarters of firms – 73 per cent – were still failing to provide the required information on the cost of advice for consumers.

“While we have seen a lot of positive progress and willingness by advisors to adapt to the new environment, I am disappointed with the results of our latest review looking at whether advisors are clear with their customers on costs and services provided,” FCA director Clive Adamson said.

Rules laid out by RDR said advisory firms should give people a generic tariff list for advice and a further price list for bespoke advice when they approach the firm.

The probe found nearly 60 per cent of companies were failing to provide customers with the generic list, while half failed to give a list of prices for individual advice.

The investigation follows an initial review by the FCA in July 2013 which uncovered problems. It will undertake its third and final piece of work on the subject in September.

The FCA declined to name the two firms that had been referred to its criminal division yesterday.

The identities of the two could be published if the FCA do eventually punish the companies, although any outcome to the case is likely to be at least a year away.